Novell buys into Web services

Customers and industry analysts are applauding Novell Inc.’s acquisition of application server vendor SilverStream Software Inc. last week as an entry into the rapidly developing Web services market.

The struggling network software vendor spent US$212 million of its $700 million in cash to acquire SilverStream, a company that reported $68 million in revenue last year. SilverStream, which has not been profitable, does have a $100 million pile of cash that Novell can tap into.

The company has a range of Java, XML and Web services applications that Novell says it will integrate with its DirXML, eDirectory and ZENworks software and its NetWare operating system. The products include:

— A Java 2 Platform Enterprise Edition (J2EE)-based application server and Web services engine called Extend that lets IT managers build cross-platform applications.

— An integration server that lets IT developers connect via XML to back-end legacy systems and manage business processes.

— Interaction and Portal Server, products that let IT developers build business applications and portals.

“The SilverStream acquisition provides Novell with a real application server, as well as a viable development environment,” says Peter Strifas, senior directory engineer at Mount Sinai Medical Center in New York. “Novell already has a good lineup of entry- and midlevel services – iPrint, iFolder, WebAccess, eDirectory and the new ZENworks Synergy – that are good pieces of a Web services solution.”

SilverStream’s standards-based Web services development environment gives Novell something new. Previous Novell products were difficult to write to because they used proprietary conventions such as NetWare Loadable Modules and hard-to-understand APIs. SilverStream uses technologies many developers are familiar with, such as Java and XML, and Web services standards such as Simple Object Access Protocol.

Chip DiComo, manager of global information systems for transportation firm Hellman Worldwide Logistics in Miami, says Novell’s Software Developer Kit is poor, and that developing network applications using Novell’s tools is difficult.

“Novell’s Portal Services, Web services and management with eDirectory will benefit greatly from SilverStream’s tools,” he says.

Further, Novell has never had an adequate application server, an area dominated by IBM and BEA Systems. It shipped NetWare 6 as an application server last October and promised a more standard application development environment, but to date the company has offered little other than its Java Virtual Machine, DirXML, which is based on XML and a version of IBM’s WebSphere Studio. SilverStream’s application, integration and interaction servers can be used with Novell’s products to add application server capability.

Novell Vice Chairman Chris Stone says SilverStream’s J2EE, XML and Web services application development environment fills out what Novell calls its “services-oriented architecture” – consulting services, application development and infrastructure.

“The acquisition also gives them a more complete story in management – they’re just adding Web services to it,” says Laura Didio, a senior analyst with The Yankee Group. “It certainly gives them the most complete network management and development package – you put SilverStream together with ZENworks and you have a very compelling tale.”

Not everyone is completely sold on the deal. Daniel Blum, senior vice president and research director at The Burton Group, and a Network World columnist, says Novell’s cash could have been better spent elsewhere.

“Novell needs to create new revenue opportunities based on selling applications that play on top of its directory, which is becoming commoditized,” Blum says. “They’ve expended part of their strategic cash reserves on this product, when they could have strengthened their provisioning and Web access management platforms. It might have been better to keep building that foundation before adding more bricks higher up.”

Novell might have a tough time grabbing market share in a Web services market dominated by established vendors.

“Novell says it is going after Microsoft, IBM and BEA Systems in the software platform market,” says Ted Chadler, an analyst with Forrester Research. “That’s going to be tough for them because each of those [companies] has a lot of capital and an awfully broad portfolio of products.”

Moreover, some observers say Novell’s history of acquisitions is spotty. The company did acquire a suite of office applications from WordPerfect; a database, Quattro Pro, from Borland; and Unix from Unix System Laboratories that went sour. However, technologies the company acquired in transactions with smaller companies such as Excelan, Callisto Software, Novetrix, JustOn and PGsoft have been successful.

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